ITAT Orders Grant of Foreign Tax Credit as per Rule 128, Holds Procedural Lapses Cannot Cause Double Taxation Read Order []
The Tribunal observed that denial of FTC would defeat the objective of DTAA due to double taxation
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that foreign tax credit (FTC) cannot be denied merely on the ground of delay in filing Form 67, because the taxes were paid abroad and the income was also offered to tax in India. Hence, the appeal was allowed.
Aparna Girish Hebbani, a non-resident Indian residing in Australia, appealed against the order passed by the Commissioner of Income Tax (Appeals), Mumbai. The order had upheld the denial of FTC under Section 90 of the Income Tax Act, 1961, for the assessment year 2019-20.
The assessee claimed a relief of ₹11.95 lakh towards foreign taxes paid under the India-Australia Double Taxation Avoidance Agreement (DTAA). However, the Centralised Processing Centre (CPC), denied the claim on the ground that Form 67 was not verified within the prescribed timeline. The rectification application filed under Section 154 was also rejected.
Before the Tribunal, the assessee submitted that she had uploaded Form 67 along with the return but it did not get verified due to technical issues relating to OTP generation. It was further explained that international travel restrictions due to COVID-19 prevented her from visiting India earlier, and she got it duly verified immediately upon activation of the mobile number in December 2021.
The Tribunal, comprising Pawan Singh (Judicial Member) and Girish Agrawal (Accountant Member), held that Rule 128 does not provide for disallowance of FTC for delayed filing of Form 67. Filing of Form 67 is procedural in nature and cannot override the substantive right to claim foreign tax credit under Section 90 of the Act and the applicable DTAA. It noted that denial of FTC solely on procedural grounds would result in double taxation.
The Tribunal also referred to earlier coordinate bench decisions, including Sonakshi Sinha v. CIT(A), wherein it was held that Rule 128 is directory and not mandatory.
Taking note of the fact that the delay was caused due to genuine hardship, the Tribunal directed the Assessing Officer to grant credit for foreign taxes paid by the assessee. Accordingly, the appeal filed by the assessee was allowed.
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